FOREX-Dollar edges higher on solid U.S. economic data

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Eimi Yamamitsu
TOKYO, Sept 2 (Reuters) - The dollar bounced off two-year
lows on Wednesday as U.S. data pointed to a firm manufacturing
activity, while the euro retreated from its highest levels since
2018 on profit-taking.
Economic data published on Tuesday showed U.S. manufacturing
activity accelerated to a nearly two-year high in August amid a
surge in new orders, with the reading from the Institute for
Supply Management highest level since November 2018. The U.S. data followed similarly upbeat Chinese and European
manufacturing indicators. Mitsuo Imaizumi, chief FX strategist at Daiwa Securities,
said an increase in pent-up demand, such as for cars, has
contributed to the rise in the greenback.
Imaizumi however added that it is "unnecessary to see the
data as entirely great," as the ISM's data also showed the
labour market remained in contraction territory.
The dollar index =USD inched up 0.12% at 92.346, having
hit its lowest since April 2018.
The greenback has been declining since last week, down about
1%, after the Federal Reserve announced it would focus more on
average inflation and higher employment. With the Fed's shift in
policy having leeway to keep U.S. interest rates lower for
longer, it has encouraged traders to sell the currency.
That view was reinforced on Tuesday as Fed Governor Lael
Brainard said the central bank would need to roll out more
stimulus to help the economy overcome the coronavirus and fulfil
the Fed's new pledge. U.S. Treasury yields fell following the speech as additional
stimulus would likely involve more aggressive bond-buying.
The euro benefited from the initial dollar sell-off, as it
rose high as $1.2014 EUR=EBS on Tuesday, its highest since May
2018.
The common currency later reversed those gains to sit at
$1.19095.
Against the Japanese yen JPY=EBS , the dollar was little
changed at 105.75 yen.
Also supporting a rebound in the greenback, U.S. Treasury
Secretary Steven Mnuchin said on Tuesday he would telephone
House Speaker Nancy Pelosi about stalled coronavirus aid
negotiations later in the day. White House chief of staff Mark
Meadows said Senate Republicans are likely to bring up a
targeted COVID-19 relief bill next week.
Among antipodean currencies, the Australian dollar AUD=D3
changed hands at $0.73845, while the New Zealand dollar NZD=D3
traded at $0.6764.
Elsewhere in the market, Sterling GBP=D3 traded at 1.3422,
just below last year's high that followed the 2019 election of
1.3516.
The Chinese yuan CNH=EBS was little changed, last up down
0.03% in offshore markets to 6.8266.